International Law

Bernard L. Madoff Settles with SEC

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From the SEC Press Release on the Madoff Settlement

The United States Securities and Exchange Commission announced that on February 9, 2009, it submitted to the Honorable Judge Louis L. Stanton, a federal judge in the Southern District of New York, the consent of Bernard L. Madoff to a proposed partial judgment imposing a permanent injunction and continuing relief previously imposed in the preliminary injunction order, entered on December 18, 2008.

Madoff consented to the partial judgment without admitting or denying the allegations of the SEC's complaint, filed on December 11, 2008.

If the partial judgment is entered by the Court, the permanent injunction will continue to restrain Madoff from violating certain antifraud provisions of the federal securities laws.

Also, the proposed partial judgment would continue against Madoff the relief imposed in the December 18, 2008 Order, including the order freezing assets.

The proposed partial judgment would leave the issues of the amount of disgorgement, prejudgment interest and civil penalty to be imposed against Madoff to be decided at a later time.

For purposes of determining Madoff's obligation to pay disgorgement, prejudgment interest and/or a civil penalty, the proposed partial judgment deems the facts of the complaint are established and cannot be contested by Madoff.

The SEC's complaint, filed on December 11, 2008, in federal court in Manhattan, alleges that Madoff and Defendant Bernard L. Madoff Investment Securities LLC have committed a $50 billion fraud and violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Advisers Act of 1940.

The complaint alleges that Madoff, just prior to the filing of the complaint on December 11, 2008, informed two senior employees that his investment advisory business was a fraud.

Madoff told these employees that he was "finished," that he had "absolutely nothing," that "it's all just one big lie," and that it was "basically, a giant Ponzi scheme."

The senior employees understood him to be saying that he had for years been paying returns to certain investors out of the principal received from other, different investors.

Madoff admitted in this conversation that the firm was insolvent and had been for years, and that he estimated the losses from this fraud were at least $50 billion.

For more information see prior litigation release no. 20834

Full post as published by Misleading Advertising Law on February 10, 2009 (boomark / email).